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Economy

08/10/2017

Michael Eister (EMBA ’17) accepted an offer to join a Myanmar-based company upon graduation. With several weeks in the new position under his belt, Eister shares his first impressions about working in a Southeast Asian nation that is undergoing political reforms.

Michael Eister traveled to Myanmar in a modern longyi, the sarong worn by many Burmese men

By Michael Eister

In December 2016 a group of MBA students ventured into the former hermit kingdom (no, not that one…) of Myanmar. The goal was to assess whether or not the economy offered opportunity, and if the nation was on its way to economic success overall. For the latter, the jury is still out. For the former I can personally attest that yes, yes, yes there is opportunity here. This nation is flowering like a lotus and opening its mind to what the outside world has to offer.

Burma is no walk in the park. In fact, the biggest hazard, as far as I can assess so far, is walking down the sidewalks. Survival depends on watching your step. This is true both literally and metaphorically. The government is still adjusting to the future, and at times is relying on rules and policies held over from British colonial days. As it crawls into the 21st century, Myanmar is a contradiction at every turn. On one hand, they want to be successful and wealthy. On the other hand, they are ever-focused on a balance that has its roots in Buddhist thought.

As MBAs we are taught to focus on disruption, change and growth. This nation’s heart is focused on maintaining an even keel. This makes for quite a challenge when trying to modernize at light speed, as many are seeking to do here. Much of the difficulty for outsiders comes from an ever-changing policy and regulatory structure. Government offices are, by western standards, in a cyclone of churn when it comes to change. A policy made one day can be gone in an instant, and in order to find that out, one often has to make frequent visits to government offices to see hard copies of policies, which are not available publicly.

06/13/2017

UCLA Anderson Forecast anticipates continued modest growth in its second quarter report. Edward Leamer, UCLA Anderson Forecast director, took a deep dive in an accompanying essay into the state of the nation’s economy, offering advice about the three critical forecasting questions: (1) Is the risk of recession elevated? (Answer: No.) (2) Can President Donald Trump make America great again in the sense of getting GDP growth back up to 3% after seven years of 2%? (Answer: Not likely.) (3) Are inflation and interest rates likely to jump up soon? (Answer: That’s hard to say.)

In his essay “Three Things to Worry About,” Leamer indicates that the president and Congress need “to figure out how to get us back into the 3% corridor, or better yet, make America great again by turning the clock back to 1960 when the growth rate was 4.8%.” Those efforts are critical to keep and support programs such as Medicare and Social Security. “A more rapidly growing economy would produce greater tax revenues and would help a lot with the burden of taking care of our elderly.”

Although the country is currently experiencing its 32nd quarter of expansion, “This current expansion has had the mildest rate of growth of any U.S. expansion in the data set,” Leamer writes. A number of factors contribute to the slow rate of growth, including the decline in manufacturing jobs, a weaker auto sector, decline in the growth rate of the working population and in total hours worked, as well as a productivity growth rate of only 0.5% since the Great Depression.

06/12/2017

Last March, Los Angeles voters rejected proposed limits on the construction of large-scale buildings, limits that included a two-year moratorium on development of dense, high-rise residential properties. In a city where working-class and middle-income households are increasingly forced to prioritize housing costs over medical care, food and even transportation, it was a decisive defeat for ballot Measure S. But will augmenting the pace and quantity of available dwellings really make living here more affordable for anyone but the super rich?

The UCLA Ziman Center for Real Estate studies the problem of housing affordability as it reaches crisis levels in California. The constraints are especially acute locally because although there is an immense amount of wealth concentrated in L.A. and land values are extremely high, ours is a very expensive city with no real wage growth within the working class.

Ziman partners regularly with the nonprofit Mercy Housing to organize symposia on topics germane to professionals in real estate, government and industry — but with a crucial public education component consistent with the mission of Ziman’s Howard and Irene Levine Program in Housing and Social Responsibility to promote the kind of dialogue that improves society in all economic sectors. Mercy Housing is a national nonprofit organization that provides affordable housing and supportive programs in 41 states to improve the economic status of residents, revitalize neighborhoods and stabilize lives.

05/23/2017

UCLA Anderson MBA students conduct Applied Management Research projects in lieu of a thesis. The nation’s first business school field study program, AMR partners students with top organizations to solve a key strategic problem. In honor of Anderson’s 2017 Impact Week, the theme of which was Purpose + Profit, we’re highlighting stories of AMRs supported by the Center for Global Management that took UCLA Anderson Class of 2017 teams overseas to collaborate with NGOs whose mission-driven work includes such global challenges as health care delivery, international labor standards and environmental conservation.

Since the 1970s, Nigeria has been heavily reliant on oil, with over 90 percent of the country’s export value currently coming from crude oil and crude oil products. With the global decline in oil prices, Nigeria needs to diversify its export products and attract foreign investments. The Nigerian Export Promotion Council (NEPC) has a long-term goal to achieve zero-oil exports from Nigeria, and our Applied Management Research team’s project was to devise a strategy to increase export of an agricultural product to the United States.

NEPC is the government agency in Nigeria that is responsible for the regulation, promotion, recording and monitoring of export trade, administered by the Ministry of Industry, Trade and Investment. Our proposal for broadening Nigeria’s non-oil export activity takes maximum advantage of the African Growth Opportunity Act (AGOA), a United States trade act that enhances market access to the U.S. for qualifying Sub-Saharan African (SSA) countries.

After seven weeks of secondary research and prep work, our entire team made the two-day trip from Los Angeles to Abuja, Nigeria, with the goal to:

03/08/2017

Stocks, the dollar and interest rates soared after the surprising election of Donald Trump on the assumption of a major shift in fiscal policy. Now that immigration and trade issues have moved to the fore, the markets are less certain as to the magnitude and timing of the fiscal changes. In its first quarterly report for 2017, the UCLA Anderson Forecast will discuss the implication of these cross currents and present a second pass at Trumponomics.

Key questions addressed at this quarter’s conference include:

Can Trump deliver on his proposed tax cuts?

How much will immigration and trade restrictions weigh on the economy?

How many times will the Fed raise interest rates this year?

The national forecast

In his outlook for the national economy, UCLA Anderson Forecast Senior Economist David Shulman wrote that some of his current expectations are similar to those of last quarter, including the approximately $500 billion a year in personal and business tax reductions, a repatriation holiday for accumulated foreign earnings, increased defense and infrastructure spending, Medicaid cuts, relaxed regulations, modest changes to trade and immigration policies, and reductions in food and aircraft exports, as several trading partners react to the policy changes. The impact of a large tax cut on an economy at or very close to full employment will likely result in a short-term growth spike, but will quickly fade. The forecast calls for real GDP growth of 2.4 percent, 3 percent and 2.2 percent in 2017, 2018 and 2019, respectively, noting that real growth trails off on a quarterly basis in 2019, as higher interest rates weigh on the economy.

Though job growth appears robust with 170,000 jobs a month expected in 2017 and 2018, the figures will trail off to about 110,000 a month in 2019 and become even slower if the administration embarks on a large-scale deportation program of unauthorized immigrants. Concurrently, the unemployment rate could bottom out at 4.1 percent in late 2018, before gradually rising.

03/07/2017

For six years, Upaya Social Ventures has helped 12 companies create over 4,100 new jobs for people living in impoverished areas in India. Upaya CEO Kate Cochran (’97) joined Impact@Anderson’s High Impact Tea series to share her experience and future goals for the nonprofit.

Cochran started out in management consulting and realized her passion for international development later in her career at an event for Unitus Labs. For several years, she served as VP of finance and operations, and later as VP of external relations for the organization, which makes seed-stage equity investments in social enterprises to benefit people living at the base of the economic pyramid. She went on to become COO and board member at Vittana Foundation, with whom a UCLA Anderson Applied Management Research field study team collaborated in 2014 on a microfinance-driven student loan project. Eventually, Cochran's long tenure in the nonprofit sector would lead her to Upaya.

An advocate of advancing entrepreneurship, and passionate about international development, Cochran has taken time to fine-tune strategies that allow Upaya to invest in viable companies capable of employing people in impoverished areas. When asked about Upaya’s impact in Indian communities, Cochran simply stated, “We create jobs for the poorest of the poor.”

The December 2016 UCLA Anderson Forecast conference focused on the ramifications of a Donald Trump presidency on the nation’s economy, as well as on those of California and Los Angeles. The event began with the presentation of three forecasts, with key takeaways for the specific regions.

A roundtable panel of UCLA experts continued the discussion, which was moderated by UCLA Anderson Forecast Senior Economist Jerry Nickelsburg and included Professor Sebastian Edwards, UCLA Anderson’s Henry Ford II Chair in International Management; Professor Gerald F. Kominski of the Department of Health Policy and Management at UCLA Fielding School of Public Health, who is also director of the UCLA Center for Health Policy Research; UCLA Anderson Forecast Senior Economist David Shulman; Professor Jeffrey B. Lewis, who is the UCLA department chair of political science; and Professor Kal Raustiala of the UCLA School of Law, who is also director of the UCLA Ronald W. Burkle Center for International Relations.

Touching on the President-elect’s recent phone call with the leader of Taiwan, Raustiala noted that Trump had often been critical of China during the presidential campaign, and called the phone conversation an “important deviation from U.S. policy and practice.”

“Trump’s inexperience with foreign policy is a concern,” the professor said. “In the field of international affairs, words and rhetoric actually matter.”

09/28/2016

UCLA Anderson Forecast’s quarterly outlook for the national economy foresees real gross domestic product growth in the 2.0% to 2.5% range throughout 2017 and 2018, where it has been for the past seven years. With the economy approaching full employment, employment growth is expected to slow from what has been a consistent 200,000 jobs per month to about 150,000 per month in 2017 and 125,000 per month the following year. The national unemployment rate is predicted to be in the 4.8% to 5.0% range throughout the forecast period. In California, steady gains in employment are expected through 2018, while the unemployment rate in the state is expected to decrease during the next two years. California’s unemployment rate is expected to be insignificantly different from the U.S. rate at 5.4% by the end of the forecast period.

How Does the Economy Affect the Presidential Election?

This quarter, Forecast Economist William Yu takes a historical look at how “the economy” influences presidential elections. Yu’s research includes state data from 1968 through 2012 and led him to the following conclusions:

The economic performance factor explains about 10% of variation of votes across states during this period. The non-economic performance factor explains 3.0% of variation.

The demography factor explains 13% of variation of votes. The religion factor explains 3.0% of variation of votes.

The state characteristic factor, which we assume remains constant for each state during this period, explains 51% of variation of votes across states.

The rest (20%) is unexplained, which could be attributed to factors such as candidates’ individual qualities and campaign messages, and strategies compounded with other issues of voter concern in each election cycle.

Leamer, who holds UCLA Anderson’s Chauncey J. Medberry Chair and also serves as director of the UCLA Anderson Forecast, is running as a write-in candidate along with presidential candidate Laurence Kotlikoff, who, like Leamer, is a professor of economics. Kotlikoff, who holds numerous chairs and appointments, is on the faculty at Boston University. Leamer and Kotlikoff first met when the former was teaching at Harvard and the latter was his student.

Leamer holds no illusions about being elected: He realizes that in today’s political climate it is virtually impossible for a write-in candidate with limited resources to actually get the most votes. But even with winning the election off the table, Leamer didn’t get involved as a publicity stunt. Instead, he sees it as a way for him and Kotlikoff to try to bring to the fore what they see as key economic issues.

Leamer sat down with the UCLA Anderson blog to discuss these issues and opened by saying, “Economists are taught to think logically and clearly about all the potential impacts of a policy — not just the surface impact, but that which is unexpected. A famous 19th-century French economist named Frederic Bastiat said, ‘There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.’”

Laurence Kotlikoff is running as a write-in candidate for president of the United States

Politicians, Leamer is implying, often propose policies that, on the surface, look good to voters. But they often do so without considering the indirect impacts. Like the “good economists” that Bastiat references, Kotlikoff and Leamer are focused on what must be foreseen.

Ed Leamer: We represent the youth of America, the future of America, and we want to make sure that the public policies that are put in place are guaranteeing that America’s going to be a great place in a decade or two. We think every bill that goes through Congress should have a youth impact statement. There should be an assessment as to how this affects the youth of America. And if it’s adverse, then we ought to be avoiding that. It ought to get a big red asterisk, saying, “This is not good for the youth of America.”

Q: What types of proposals would avoid that asterisk?

Leamer: From my perspective, there are three things that the nation ought to do.

First of all, we’ve got to have much better employment prospects for college graduates and high school graduates. We need to do something to create the access to good jobs for the youth, and to a large extent that comes from workforce development and better educational outcomes.

06/09/2016

The June 2016 second-quarter economic forecast asked hard questions about the overall outlook for the U.S. and California, particularly the future of commercial real estate. In his keynote address, Peter Lowy made the answers sound easy.

Lowy is co-CEO of Westfield Corporation, one of the world’s leading shopping center companies, with retail destinations in London, New York, San Francisco and Los Angeles among its portfolio of 34 malls and 6,480 retail outlets in the U.S., UK and Europe. He is also a chairman of the company. Last year, Westfield Corporation’s approximately 400 million customer visits to Westfield shopping centers generated over $16 billion in retail sales. With new investments underway, Westfield’s value is expected to exceed $50 billion by 2020.

Lowy has 30 years’ experience in the shopping center and real estate investment trust industry and has been with Westfield Group since 1983. So when he told the Forecast audience that his company is thriving, he didn’t have to talk long to convince them — and he may have provided the “sliver of optimism” Dean Judy Olian hoped for when she introduced him.

He identified the three areas where the most significant shifts have occurred and how Westfield is approaching them profitably: technology, consumer behavior and the retail business model.

1. Technology is an opportunity for traditional retail to build stronger connections with its customers.

Lowy evangelized at length on the power of mobile and other technologies to draw consumers to physical locations and to streamline their experience with retailers both in person and remotely.

Westfield’s multivalent app purports to guide shoppers to the nearest mall via the quickest route, advise on the closest parking, enable retailers to download every SKU available to individuals’ phones, and steer the shopper not just to stores but products and services. Naturally, the app facilitates ticket purchases, restaurant reservations and food orders that can be picked up or delivered. “We have already created the technology backbone to connect our customers to these services,” Lowy said. The product was developed by the company’s Westfield Labs, where it focuses on “removing the friction from physical commerce.” The goal is seamless customer experiences whether at a local mall, an airport or in transit.